Walnut Place Files Removal Notice of BofA Settlement to District Court

By David McLaughlin -
Aug 26, 2011

An investor group challenging Bank
of America Corp. (BAC)’s proposed $8.5 billion mortgage-bond
settlement seek to move the case to federal court from state
court.

Walnut Place LLC and related entities that would be bound
by the proposed deal filed a notice of removal of the case to
U.S. District Court in Manhattan. The case was first filed in
state court, where a judge is scheduled to consider approving
the agreement in November.

A change in venue that extends how long the case takes may
mean a longer period of concern among Bank of America
shareholders about whether the settlement’s costs will increase.
It may also give bondholders seeking a large payout more time to
organize their efforts and strengthen their objections,
according to Bill Frey, head of investment and brokerage firm
Greenwich Financial Services LLC in Greenwich, Connecticut, who
advises mortgage-securities investors.

“This deal is like a fish: the more you look at it the
more it stinks,” Frey said.

Under the proposed settlement, Bank of America would pay
$8.5 billion to resolve claims from investors in Countrywide
Financial mortgage bonds. It was negotiated with a group of
institutional investors and would apply to investors outside
that group.

‘Tactical Maneuvering’

Bank of New York Mellon Corp., the trustee for the
mortgage-securitization trusts covered by the settlement, will
seek to move the case back to state court, Kevin Heine, a bank
spokesman said.

The effort by Walnut Place to move the case to federal
court “is unsupported by the law and will only serve to delay
the resolution of the proceeding,” Heine said.

“This tactical maneuvering at the deadline for objections
has no impact on the underlying merits of the agreement,” Bank
of America spokesman Lawrence Grayson said in an e-mailed
statement.

David Grais, a lawyer for Walnut Place, couldn’t
immediately be reached for comment.

The case is In the matter of the application of The Bank of
New York Mellon, 651786/2011, New York state Supreme Court, New
York County (Manhattan).